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C O N F I D E N T I A L JERUSALEM 000357 
 
SIPDIS 
 
NEA FOR IPA AND SEMEP; NSC FOR KUMAR; USTR FOR FRANCESKI, 
KLEIN, AND VENKATARAMAN; GENEVA FOR USTR/SHARK 
 
E.O. 12958: DECL: 02/25/2020 
TAGS: PREL ETRD USTR WTRO ECON KWBG IS
SUBJECT: PALESTINIAN AUTHORITY REQUEST FOR WTO OBSERVER 
STATUS:  USTR MEETINGS WITH PALESTINIAN OFFICIALS AND 
PRIVATE SECTOR 
 
REF: A. STATE 14912 
     ¶B. 09 JERUSALEM 1993 
     ¶C. 09 GENEVA 961 
 
Classified By: CG Daniel Rubinstein, reasons 1.4 (b) and (d) 
 
Summary 
------- 
 
¶1. (SBU)  Representatives of the Office of the United States 
Trade Representative (USTR) met with Palestinian Authority 
(PA) and Palestinian private sector representatives to 
discuss the PA's pending request for World Trade Organization 
(WTO) observer status.  PA Prime Minister Fayyad and Minister 
of National Economy Abu-Libdeh described PA plans to use 
observer status as a framework for needed reforms, 
development of legislation, and institution building.  They 
emphasized that the PA would not use observer status as a 
platform to politicize the WTO General Council.  USTR 
representatives also met with the PA Ministry of National 
Economy's WTO Team to continue the joint review of the 
existing trade regime begun in January (ref A), and with the 
Palestinian Private Sector Coordination Council to stress the 
importance of private sector involvement in the WTO process. 
PA officials expressed appreciation for USG support of their 
observership application in the General Council and its 
subsidiary bodies, and asked for USG assistance and advice 
for obtaining this objective.  USTR, USAID, Embassy Tel Aviv, 
and Post discussed potential areas for assistance, and the 
needed follow-up in Geneva and Washington.  End summary. 
 
¶2. (U)  Cecilia Klein, Senior Director for WTO Accessions and 
Import Licensing Issues, and Arun Venkataraman, Associate 
General Counsel, from the Office of the U.S. Trade 
Representative visited Jerusalem and Ramallah February 22-24. 
 
 
Fayyad:  WTO as a Tool for Statebuilding, Reform 
--------------------------------------------- --- 
 
¶3. (C)  Prime Minister Salam Fayyad told USTR representatives 
that the PA had made the decision to use the WTO agreements 
as a framework for economic reform and institution building. 
He stressed that observership would lend critical support to 
his statebuilding efforts, and help ensure implementation of 
reforms that conformed to international standards.  Fayyad 
acknowledged that there was a political dimension to the PA's 
application, explaining that the political benefit of 
observer status would be a natural consequence of membership 
in the WTO community.  However, the political benefit was not 
itself the reason for the PA's efforts, Fayyad said. 
 
¶4. (C) Fayyad stressed that the PA would approach the WTO in 
a "serious way," and that it did not "serve our interests to 
say we are ready for accession when we are not."  He 
underscored the PA's need for both technical and diplomatic 
assistance in supporting these efforts, adding "we could wait 
on observer status, but I honestly think that we can benefit 
from association with the WTO." 
 
¶5. (C) Fayyad acknowledged that Israeli acquiescence to the 
PA application would be necessary, given the consensus-based 
nature of the WTO.  He called the road to WTO observership 
"tricky," adding that the GOI might try to link the PA's 
request to other political issues.  But, he said, "I'm 
interested in getting to where we are going, not winning a 
debate."  The PA was prepared to discuss this issue frankly 
with the GOI, he said. 
 
¶6. (C) Turning to trade issues, Fayyad said that Palestinians 
should take advantage of being next-door to an economic 
powerhouse like Israel.  "You will find," he told USTR, "that 
on the basic WTO principles such as open market access, an 
enabling investment environment, and low tariffs, you are 
pushing on an open door -- these are all things I want."  He 
acknowledged that protectionist practices existed, 
attributing them largely to aspects of the PA's customs 
envelope with Israel (Israeli agricultural quotas, certain 
high tariffs, and high taxes on luxury goods).  The PA is 
 
 
nonetheless trying to liberalize, he said. 
 
¶7. (C) Fayyad said that his ideal would be a 
non-discriminatory system with low tariffs across the board, 
one that would be granted to trading partners "regardless of 
reciprocity."  In reference to the Paris Protocol, Fayyad 
stated that he was "not keen on changing what exists."  While 
the Protocol is a much better a system than most people give 
it credit for, he said, it is not being implemented as it 
should be, and parts of it could be improved.  Overall, 
Fayyad claimed that the Protocol had served the PA well and 
he could "live with it." 
 
Abu-Libdeh:  This is not a political issue 
------------------------------------------ 
 
¶8. (C) Minister of National Economy Hasan Abu-Libdeh pointed 
to the inclusion of WTO observership in PM Fayyad's two-year 
plan for statehood, noting that the PA intended to use 
observer status as an impetus for timely implementation of 
reforms based on WTO provisions and increased market access. 
He emphasized that the application is not an "academic 
exercise," but rather is necessary to bolster the PA's 
ability to use international standards as the basis for 
institution building.  We are "toddlers, maybe even infants" 
in trade policy, he said, and "we need your help and the help 
of other members." 
 
¶9. (C) Abu-Libdeh said that the PA is building the 
infrastructure of a state, including a trade regime and a 
functioning economy that does not depend on donor assistance. 
 "Everyone agrees that some day there will be a Palestinian 
state," he said. "The difference between Israelis and 
Palestinians is the definition of 'some day.'"  He asked USTR 
to inform the GOI of the PA's intention to request a 
working-level meeting with the GOI to discuss their bid for 
WTO observer status.  Note:  Ministry officials subsequently 
confirmed to EconChief February 25 that they were moving 
forward to request working-level meetings with the GOI on WTO 
"and other issues."  End note. 
 
Review of the PA's Trade Regime 
------------------------------- 
 
¶10. (SBU) USTR representatives also met with the Ministry of 
National Economy's (MoNE) WTO team for a full day to review 
the PA's existing trade regime, clarify issues discussed in 
the January PA-USTR telcon, and identify current trade policy 
authorities and gaps in authority.  The team included Hatem 
Yousef, the PM's Advisor on Custom Reform and Taxes; Bashar 
Abaza, PA Customs and Excise; Fuad Shubaki, PA Customs; Tareq 
Abu-Liban, Ministry of Agriculture; Hazem Shunnar and 
Mohammed Sayyed, Palestinian Standards Institute; Saeb Bamia, 
Private Sector Coordination Council; Maha Sabya, Corporate 
Registration; Ramadan Bdieh, WTO Center; Saad al-Khatib, 
advisor to the Minister of National Economy; and Nahid 
al-Qudsi, IPR enforcement, MoNE. 
 
¶11. (C)  The MoNE team laid out its current efforts to use 
WTO provisions as the framework for institution-building and 
a thorough revision of trade and commercial legislation, and 
briefed on the "WTO Roadmap for Palestine," a copy of which 
is available on the unclassified website 
www.intelink.gov/communities/state/palecon.  USTR 
representatives and the MoNE team reviewed in detail the 
questions that USTR had prepared (ref A) on importation, 
exportation, customs, trade agreements, tariffs, taxation, 
policy mechanisms, transparency, lawmaking, trading rights, 
price controls, technical barriers to trade and sanitary and 
phytosanitary, agriculture, export duties, services, and 
intellectual property.  A more detailed report on this review 
will be provided by USTR septel. 
 
¶12. (C) During the review, USTR representatives noted that 
the PA appears to have the authority under the Paris Protocol 
over a significant number of areas covered by WTO provisions, 
such as internal distribution of goods, trade in services, 
import licensing, export regulation, intellectual property 
rights, and agriculture support, even if this authority is 
 
 
not currently fully exercised.  At the same time, they noted, 
there are also other areas, principally in customs processing 
of imports, tariffs, and other border formalities, where the 
PA does not have full autonomous control.  There are also 
significant gaps in IPR protection enforcement and commercial 
legislation.  Authority in the area of standards and sanitary 
measures is in the hands of the PA, but is exercised mainly 
to enforce Israeli requirements on imports, as provided for 
in the Paris Protocol. 
 
¶13. (C) Klein stressed that WTO observership does not mandate 
that an applicant for observer status be WTO-compliant, but 
that it must have intent to initiate accession at some point. 
 USTR offered to ask U.S. experts to review draft PA 
commercial legislation and provide comments.  She also noted 
that USTR would work with other USG agencies to ensure that 
U.S. technical assistance supports PA reform efforts based on 
WTO and to refine current programs, as necessary. 
 
The Role of the Private Sector 
------------------------------ 
 
¶14. (C) In a separate meeting with the heads of PA private 
sector associations, Klein stressed the importance of 
involving the private sector early in trade policy 
decision-making and PA participation in WTO, since the 
resulting reforms and tariff reductions would impact them 
first and foremost.  At their request, she outlined USG legal 
requirements for trade policy coordination with the private 
sector, Congress, and among agencies participating in the 
Trade Policy Staff Committee (TPSC).  She pointed out the 
importance of communication with the PA concerning private 
sector interests, in order to ensure effective use of trade 
policy. 
 
¶15. (C) Private sector representatives asked for USG 
consideration of how technical assistance could be utilized 
to build capacity among their organizations to use the WTO to 
benefit their members.  The MoNE reported that it had 
established several coordination mechanisms when WTO observer 
status was first approached in 2001, including a "National 
Task Force for Economic Development," composed of public and 
private sector representatives and a WTO resource center that 
acts as a technical advisory team.  While coordination 
activities have stalled since then, Saeb Bamian, chair of the 
Private Sector Coordination Council (composed of 
representatives from chambers and industry associations) 
noted that the Council could provide mechanisms for ongoing 
private sector involvement as the PA developed its trade 
regime. 
 
Next Steps for the USG and PA 
----------------------------- 
 
¶16. (C) Based on the results of the three days of 
discussions, the USTR team stressed the importance of 
re-focusing the PA's approach to WTO observership.  They 
suggested emphasizing that while the PA is not yet a state 
nor a separate customs territory (with full autonomy over its 
trade regime and the issues covered by WTO provisions), it is 
recognized as a state in the making, it has significant trade 
regime functionality, and it clearly intends to join the WTO 
at some point.  The PA was encouraged to consult with other 
delegations in Geneva (not just missions in Ramallah and 
Jerusalem) to build consensus for the application, dealing 
frankly with current limitations in their trade regime and 
emphasizing their efforts to use observer status to help 
build the economy and expand the trade regime.  She suggested 
that the PA prepare a presentation for the consultations that 
focused on economic reform and statebuilding and defused 
concerns about political posturing.  Klein also urged the PA 
to focus on observer status, rather than on accession. 
 
¶17. (C) Klein emphasized that, as a WTO member, Israel's 
acquiescence to the request would be necessary for the PA to 
become a WTO observer.  Klein noted the GOI's concerns about 
the PA's efforts to prohibit sale of goods produced in 
Israeli settlements and the possible use of PA WTO observer 
status as a political platform that would disrupt legitimate 
 
 
WTO work. She urged the PA to follow up on its proposal to 
meet with the GOI at a working level.  She said that USTR 
intended to help as much as possible, and would review the 
information and the materials provided by the PA in these 
discussions, work with other USG agencies to refine suggested 
technical assistance, and seek TPSC confirmation of the USG 
position and a plan to support it in Geneva. 
 
¶18. (U) This cable has been cleared by USTR's Cecilia Klein. 
 
RUBINSTEIN